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Apple vs. Sony: Why a $600 phone soars and a $600 console tanks

Jeff Nolan writes on the Sony’s PS3 debacle. IMHO, the best part of the post is Jeff’s comparison between the PS3 and the iPhone:

What I do find interesting to consider about the price point is that more than a million people shelled out $500-600 for an iPhone (plus $80-100 a month). What does that tell me? Not sure because the Apple reality distortion field makes people do things they would otherwise consider irrational (me included), but perhaps it’s that communication capabilities outweigh all others in terms of the perceived value of a device. Let’s also not forget that the iPhone is fashion, the PS3 simply isn’t. [Jeff Nolan]

Jeff identifies two good reasons for the success of the iPhone and the failure of the PS3 - value from communication, and value from fashion. I’d like to add a few other reasons as to why one $600 spend is justifiable and another isn’t:

1. Marginal Benefit: the marginal benefit of a PS3 over a PS2, for the average person, is comparatively low. A bump in graphics quality (which incurs secondary costs, see below), combined with an unresolved format-battle tie-in (Blu-ray) creates a murky “pro” list with which to justify a purchase, vs. a very clear “con” in the form of $600 for a living room entertainment device.
2. Secondary Costs: Realizing the full benefit of the PS3 requires (for many) upgrading a TV, receiver and speakers, and cabling - potentially thousands of dollars to be spent. Secondary costs quickly erode the already shaky core proposition of slightly better graphics (see Marginal Benefit above).
3. Usage Credibility: Justifying a major purchase requires some credible utility that you’ll get out of it. As Jeff pointed out for the iPhone, “communication” is perceived as such; unfortunately for Sony, living room game-playing is not.
4. Usage Frequency: Your iPhone is going to be in your pocket all day, every day, and used repeatedly in a variety of ways through-out each day. A PS3 will spend 97% of its existence in an idle state gathering dust between playing sessions while owners eat, sleep, and otherwise lead their lives.

What it all adds up to for Sony is a lesson in marketing super-premium products. Premium prices require a clear, credible value proposition that can be realized regularly.

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